The Company Law Review was launched as an independent
review by Margaret Beckett, then Secretary of State for Trade
and Industry, in March 1998. The Department's consultation paper,
"Modern Company Law for a Competitive Economy" (DTI/Pub
3162/6.3k/3/98/NP), published on the day of the launch, outlined
the nature of the problems which the Review was designed to address,
its proposed objectives, and the scope and process envisaged.

2. The DTIs objectives in undertaking this
review areas set out in the consultation paperto
promote a framework for the formation and constitution of British
businesses which through an effective combination of law and non-statutory
regulation:

 supports the creation, growth and
competitiveness of British companies and partnerships;

 promotes an internationally competitive
framework for business, so that the UK continues to be an attractive
place to do business;

 provides straightforward, cost-effective
and fair regulation which balances the interests of business with
those of shareholders, creditors and others; and

 promotes consistency, predictability
and transparency and underpins high standards of company behaviour
and corporate governance.

3. The Review is managed by an independent,
expert Steering Group. The Steering Group is advised by a number
of working groups comprising experts in various fields of Company
Law. There is also a Consultative Committee which provides a forum
in which organisations with a wider interest in company law can
comment on the emerging conclusions of the Review. Details of
the Steering Group and Consultative Committee members are attached
at Annexes 1 and 2.

4. The Steering Group is due to deliver
its final report to Ministers in Spring 2001probably in
May. Ministers will then set out their response and proposed way
forward in the light of the Steering Group's recommendations.
The Secretary of State has underlined the importance of providing
a modern framework of company law and expressed broad support
for the Review's objective of improving disclosure and transparency.
He has stated that he will not take a final view on the Review's
proposals or on the details of its recommendations until he has
studied its final report; but in his speech to the Greenpeace
Business Conference on 4 October 2000 he noted that once the Review
had produced its final report, their proposals relating to environmental
reporting would be an important area for him to address.

5. The Review has been based on open consultation,
and has sought to build a broadly-based consensus. The Steering
Group published its first major consultation document (Modern
Company Law for a Competitive EconomyThe Strategic Framework,
URN 99/654) in February 1999. In March 2000 it published its second
major document: Modern Company Law for a Competitive EconomyDeveloping
the Framework, (URN 00/656). Its last major consultation document
before the final report is due to be published in November this
year. In addition there have been a number of "single issue"
consultation documents on more focused or technical issues.

6. The March 2000 consultation document
set out at a fairly detailed level some key proposals on governance
and transparency, including proposals on directors' duties and
improved company reporting, which are relevant to the Committee's
interest in companies' environmental performance. These are outlined
below. The document to be published in November will set out the
Steering Group's proposed way forward in the light of responses
to the March consultation. While this will entail some revision
at a detailed level, the key elements of the proposals are unlikely
to change.

PROPOSALS RELATEDTO SUSTAINABLE
DEVELOPMENTANDTHE ENVIRONMENT

7. The key components of the Review's proposals
on company governance are its proposed statement of directors'
duties, and improvements in company reportingprincipally
through the proposed new statutory Operating and Financial Review
(OFR).

DIRECTORS' DUTIES

8. In the March document the Steering Group
recommended that a summary statement of directors' duties should
for the first time be included in the Companies Act. It proposed
an "inclusive" approach to directors' duties: this would
require directors to act so as to achieve the success of the company
in the best interests of shareholders; but it also recognises
that this goal can only be achieved by taking due account, in
cases where they are relevant, of wider interests such as relationships
with employees, customers, suppliers and the community, and the
impact of business decisions on the company's reputation and on
the environment. The proposed statement of duties also recognises
the need for directors to take proper account of the long-term,
as well as the short-term, consequences of their decisions.

9. One of the objectives of the proposal
is to bring about improvements in governance both by clarifying
the law for directors and by helping to change the climate of
decision-making.

STATUTORY OPERATINGAND FINANCIAL
REVIEW

10. For larger and listed companies, the
Review has proposed that there should be a new format for the
statutory Annual Report broadly based on the current Operating
and Financial Review (a best-practice report devised by the Accounting
Standards Board which comments on the wider aspects of the company's
activities and performance). The new statutory OFR would include:

 a fair review of the development
of the company's business over the year and its position at the
end of it;

 the company's purpose, strategy and
principal drivers of performance;

 an account of the company's key relationships
with employees, customers, suppliers and others on which its success
depends;

 the company's approach to corporate
governancevalues and structures;

 the dynamics of the business, ie
known events, trends, uncertainties and other factors which may
substantially affect future performance, including investment
programmes: this would also cover risks, opportunities and related
responses in connection with environmental costs and liabilities;

 the company's environmental policies
and performance, including compliance with relevant laws and regulations;

 policies and performance on community,
social, ethical and reputational issues; and

11. All companies preparing an OFR would
be required to report on the first two items. They would be required
to report on the other items to the extent that they were material
to the company's performance.

12. The aim of the OFR is to improve the
quality, usefulness and relevance of information available to
the markets and to everyone with an interest in the company. As
such, the Review intends that it should lead to improved understanding
of business performance and prospects, as well as promoting accountability
and encouraging responsiveness and high standards of business
practice.

13. The Review has suggested that the basic
OFR requirements (including the requirements for coverage of each
of the headings listed in paragraph 10 above) should be included
in statute, with more detailed reporting requirements being set
by a standards body. This part of their proposal will be developed
further in the document to be published at the end of November.
In principle it is envisaged that companies would be required
to report in accordance with standards set by the standards-setting
body, in order to ensure that items were properly reported on
and to facilitate comparisons both of a company's year-on-year
performance and between different companies.

14. As noted above, the Review has proceeded
on an open and consultative basis, and has sought to build wide
support for its approach. This has been the case during the development
of the Review's proposals, including those on the OFR. In addition
to the membership of the working groups and the Consultative Committee,
the views of groups with a wider interest have been sought during
the preparation of the proposals. This has included members of
the Review team speaking at a number of public events and meeting
organisations such as NGOs and interest groups to discuss the
proposals in greater detail.

15. In addition, in June this year, the
Review organised a seminar on the proposals for the new statutory
OFR and reporting on wider non financial issues. The seminar was
attended by a range of representatives of business, the users
of accounts, the professions, Government and the NGOs and included
sessions chaired by representatives of the Centre for Tomorrow's
Company, SustainAbility, the business community, the investor
community, the Accounting Standards Board and AccountAbility.